Copyright 1987 Church Law & Tax Report. Adapted with permission.
Christians give substantially to their churches out of gratitude to God and obedience to his commands. Such giving to God’s work is, in itself, a reward.
But an income tax deduction doesn’t hurt.
Contrary to popular belief, charitable contributions to churches and other tax-exempt organizations are not automatically deductible. The benefit of a tax deduction comes only when donors satisfy certain conditions.
The conditions? One is that the donor be able to substantiate the contribution by maintaining records demonstrating that a contribution was in fact made and giving the amount or value of the contribution. The substantiation requirements, however, vary depending on the nature of the contribution, and donor and recipient have different responsibilities.
Donations of money offer few problems: churches merely receipt all donations, giving the donors a reliable record for tax purposes. But noncash gifts, because of their nebulous value, present greater difficulties. So let’s consider two categories of noncash gifts: property worth less than $5,000, and property worth more than $5,000.
Contributions valued under $5,000
Substantiation requirements for contributions of noncash property such as land, equipment, stock, books, art, or vehicles are stringent. Tax regulations require a receipt from the church showing the name of the church, the date and location of the contribution, and a detailed description of the property.
In addition, the church may specify on its receipt the value of the donated property. Church officers, however, are under no obligation to appraise donated property. But the church is free to list the value of the property as determined by the donor.
In other words, ask the donor to provide a valuation of the property, and then include a statement on the receipt that the donor has valued the property at the specified amount. In no case should a church act as an appraiser. A church receipt might read:
First Church, of 123 Main Street, Chicago, Illinois, acknowledges receipt of a charitable contribution from John Jones this 10th day of August 1987, at Chicago, Illinois, of a 1983 four-door Oldsmobile Regency sedan in good condition, vehicle identification number FE398R573201. The donor has valued the property as of the date of the contribution at $4,500. Signed, ____
So much for the church’s responsibilities. What are the donors’ responsibilities?
For each item of donated property, they must maintain a reliable written record that includes the following: (1) the name and address of the church; (2) the date and location of the contribution; (3) a detailed description of the property; (4) the fair market value of the property at the time of the contribution, including a description of how the value was determined; (5) the cost of the property; (6) an explanation of the amount claimed as a deduction in the current year (if not all is claimed during that year); and (7) the terms of any agreement between the donor and church relating to the use, sale, or other disposition of the property.
If the donated property’s value exceeds $500, the following additional written records are needed: (8) an explanation of the manner of acquisition by the donor (such as by purchase, gift, inheritance, or exchange), and (9) the cost of the property immediately preceding the date on which the contribution was made.
Finally, donors who contribute property valued between $500 and $5,000 must complete the front side of IRS Form 8283 and submit it with the federal income tax return on which the contribution is claimed. Since many donors are unaware of this requirement, churches can assist them by obtaining copies of the form from the IRS (up to fifteen are free) and giving one-along with a copy of this article-to each donor.
Contributions valued over $5,000
Once a noncash gift is valued by the donor at greater than $5,000, further substantiation requirements kick in. The new requirements for major donations were enacted in 1985 to make it more difficult for donors to inflate the value of their gifts and thus reap the benefits of greater tax deductions.
The Treasury Department specifies that no deduction for donated property valued at more than $5,000 will be allowed unless the requirements are satisfied. These requirements ordinarily apply to a contribution of a single item (real estate, a vehicle, etc.) valued by the donor at more than $5,000, but they also can be triggered by contributions of similar items (such as two lots or several computer components) within the same year if the combined claimed value exceeds $5,000.
Publicly traded stock is not subject to these requirements since its value is readily ascertainable. Contributions of nonpublicly traded stock (for instance, stock held by most small, family-owned corporations) are subject to these requirements if the value claimed by the donor exceeds $10,000.
Under the 1985 regulations, the donor must do the following:
 Obtain a qualified appraisal. Regulations define a qualified appraisal as one made by a “qualified appraiser” within sixty days of the contribution and containing the following information: (1) an adequate description of the donated property; (2) the physical condition of the property; (3) the date (or expected date) of the contribution; (4) the terms of any agreement pertaining to the use or disposition of the property; (5) the name, address, and social security number of the qualified appraiser; (6) the qualifications of the appraiser; (7) a statement that the appraisal was prepared for income tax purposes; (8) the date on which the property was valued; (9) the appraised fair market value of the property on the date (or expected date) of the contribution; (10) the method of valuation used to determine the fair market value, and (11) a description of the fee arrangement between the donor and appraiser. Donors ordinarily should refrain from employing an appraiser unfamiliar with these requirements.
A “qualified appraiser” is someone who: (1) holds himself or herself out to the public as an appraiser; (2) is qualified by education, experience, background, and membership, if any, in professional appraisal associations; (3) is not in any way a party in the transaction; (4) understands that a false or fraudulent overvaluation of property may subject the appraiser to civil penalties; and (5) does not base his or her fee on a percentage of the appraised value.
 Prepare a qualified appraisal summary. A donor must also complete an appraisal summary on the back side of Form 8283 and enclose it with the tax return in which the deduction is claimed. Various parts of this form include sections for: the church to acknowledge receipt of the contribution, a description of the donated property and an estimation of its value, a listing of similar donated items individually worth more than $500, and the appraiser’s certification.
 Maintain records. The donor ought to keep a copy of the qualified appraisal, along with a record of the name and address of the church, the location of the contribution, and the fair market value of the property.
A church receiving a contribution of property valued at more than $5,000 has the following obligations: (1) to write and sign an acknowledgment to the donor (thanks would probably be appropriate, too!), (2) to complete and sign the donee’s acknowledgement on the donor’s Form 8283 (as noted above) and, (3) if it disposes of the property within two years of the date of contribution, to complete and file IRS Form 8282.
A Form 8282 must be filed within ninety days after the property is disposed of, and a copy must be sent to the donor. The form is available from the IRS (the toll-free forms hotline is 1-800-424-3676) and is easy to complete. The IRS is primarily concerned with learning the amount received by the church as an additional means of verifying the valuation claimed by the donor. Failure by the church to file Form 8282 ordinarily subjects the donor’s tax return to greater scrutiny by the IRS, so the timely filing of the form upon disposal of the property is a courtesy to the donor as well as a requirement of the government.
Churches aware of these IRS regulations can help their donors receive the benefit of a tax deduction, for compliance with these regulations spells the difference between a tax deduction expected and a tax deduction granted. And that’s a big difference on April 15.
-Richard R. Hammar
legal counsel, Assemblies of God
Springfield, Missouri
Copyright © 1988 by the author or Christianity Today/Leadership Journal. Click here for reprint information on Leadership Journal.
